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Genuity Faces Potential Bankruptcy

Verizon's decision this week to drop reintegration plans with Genuity left the Internet backbone service provider facing possible bankruptcy.

After Verizon Communications Inc. dropped plans to reintegrate Genuity Inc. this week, the Internet backbone service providers prospects for impending bankruptcy are rising. Nonetheless, Genuity officials said today that they anticipate continuing operations without service interruption.

Verizons purportedly unexpected decision resulted in credit defaults for Genuity because the abandoned reintegration plan means the cancellation of credit. Company officials did not attempt to hide their surprise or disappointment, but at the same time they tried to assure the market that Genuitys survivability is not at stake. According to company spokesman John Vincenzo, the Woburn, Mass., company has $1.3 billion in cash on hand and is negotiating with creditors for additional financing.

"The bottom line is that were going to continue to operate the business," Vincenzo said. "Customers shouldnt anticipate any change in how we do business or how we deliver service." Nonetheless, bankruptcy is an option, he added.

Genuity is downplaying the operational impact of Verizons change of heart. "[Verizon] has not done anything to change its commercial relationship with us," Vincenzo said. Verizon said this week that it will continue to purchase Genuitys services and to resell its voice-over-IP enterprise services.

Further reading

Verizon, based in New York, announced that its decision was based on several factors, including the state of the telecommunications market, but company officials did not elaborate.

Genuity, formerly a division of GTE Corp., was launched out on its own two years ago as a regulatory condition of the merger of GTE and Bell Atlantic Corp., which formed Verizon.

GTE was required to sell 90.5 percent of its interest in Genuity before the merger was approved, but the newly formed Verizon retained the option of converting its shares back into a controlling position.

Some analysts, who asked not to be named, speculated that the prospect of WorldCom Inc.s UUNet division becoming available for sale out of bankruptcy may have influenced Verizons decision to abandon GTEs former Internet access unit.